BANCA COMUNAL, THE COMMUNITY BANK PRODUCT
The Community Bank is a program/product was created by Banco ADOPEM and co-developed with Caitlin Stilin-Rooney in 2013-2014 to enable small microenterprises of Haitian descent to gain access to financial services. The Blockchain Border Bank project of law.MIT.edu aims to prototype and test an approach enabling the Community Bank to provide it's members usable and valid identity and enduring access to economic independence.
Through group lending or Community Banking, operating costs are reduced and entities can provide a large number of credits for very small amounts while serving the most marginalized and vulnerable groups (eg. Displaced populations, refugees, undocumented persons living under the poverty line, etc.)
- Low-income women
- Heads of households
- Refugees, (especially Haitian and Dominicans of Haitian descent without legal documentation)
Main Objectives of Community Banking
- Increase household income through access to credit and savings
- Improve the quality of life for populations on the border region
- Implement a credit product with a savings component that promotes entrepreneurship, facilitates the development of character and helps micro-business grow
The Community Bank's members are self-selected and self-managed. In this sense, its members evaluate and decide who can join the group using as a base the selection criteria defined by ADOPEM. Groups can have between 15-35 members, (in our case each group has 25 members and in order to organize and administer better, members are divided into 6 groups or 25 * 6 = 150 persons/families accessing this product)
The majority of the group are women who have access to credit and savings and are as a group, the guarantees of each other. Each group appoints a President/Group Leader in charge of registering and managing credit and savings operations of members. The Community Bank operates as a whole and is managed by a Steering Committee of 5 members freely elected (Manager, Treasurer / or Vice-Treasurer, Secretary / Auditor )
No Need for Collateral
All members agree to guarantee each other (joint guarantee). They must participate in weekly meetings. The first cycle of loans ranges from RD $ 2,000 or (USD$45.00) to RD $ 4,000 (USD $90.00) The sum of loans of each of the members is the community bank loan. For a renewal, group members must have paid the loan in full. The amount of renewals increases up to 30% depending on the behavior of previous credit payments, attendance at meetings and savings. To qualify for a loan, the bank must repay the previous loan in full.
The term is usually four (4) months or sixteen weeks (16) for the first credit and four (4) to eight (8) months for subsequent loans. Loans are repaid in weekly payments of principal and interest for a first loan cycle. Renovations for groups with a perfect credit history allow weekly, biweekly or monthly payments depending on the preference of the group. Payments are accompanied by a mandatory savings of 10% to 20% of the total loan amount to be deposited in equal installments weekly.
The group attends a weekly meetings during which payments are received, recorded and deposited. (Meetings are often used as a platform to provide other non-financial services to the group, generally provided in accordance with specialized governmental and private entities operating in the region- however this is currently not happening)
A credit counselor (ours is named Alfonso Florian) directly monitors the groups Credit and Savings and (is supposed to) attend group meetings. He is also responsible for the formation and training of groups and for providing advice to the Committee in best administrative practices.
The Board of Directors is responsible for managing the group, records, and collecting loan payments "under supervision of credit counselor". The entire operation of the Community Bank is has standard policies, procedures and formats defined by the ADOPEM.
TARGET MARKET AND PROFILE
The project target population consists of people living under the poverty line in towns along the border. Specifically, the product seeks to reach populations with a high concentration of entrepreneurs and small businesses mainly of Haitian descent, including undocumented workers who cannot easily access financial services.
Given the profile of the target and lack of governmental documentation, there need to be at least two members in each group with their documents. Each group member is required to save 10% of the amount paid during the loan cycle, to be deposited together with credit quotas.
ADOPEM encourages the Community Bank to create a savings fund specifically to finance the activities of the Bank (Ex. Productive activities, social activities, etc.). The Bank defines the amount to which each member must contribute -usually with weekly payments. The rules should govern the Community Bank Savings Fund and should be clearly defined by the group during the first cycle.
Selection of Members / Training of Members
The selection of members is one of the most important steps in the formation of a community bank.
A thorough background check and analysis of the person, their business is important for determining an individuals credit, are replaced in the group loan for self-selection of members and by the guarantee. Members must know each other, come from the same community and mutually guarantee their loans.
For optimal management of the Community Bank, it is recommended that members are subdivided into groups of three to five members each. The groups thus formed are governed by the Community Bank. The selection of members of the community bank and each group must meet the following requirements:
Governing rules for Members
- come from the same community and must be known in character and reputation
- come from the same socio-economic status
- should be mutually trusted within the bank
- members should not come from the same family (though they can be related) but must operate different businesses and not live under the same roof (in this case, 2 recommendations should come from non-members
- cannot have more than one member of the same family join the steering committee
- each member must be recommended in writing by two other members of the same group of
- each member must be fully approved by the Group
- each group must select a group coordinator
- each member of a group and its members must be accepted unanimously by the Community Bank by signing the back of the recommendations of each member
Note: group members can not be imposed by the AC or any other member of the organization. Otherwise, in case of default, members could refuse to cover the debt of a member.
Duties and Responsibilities
Group must attend meetings regularly and on time and deliver loan payments and compulsory deposits weekly
Group President/Leader must pays for any default in payment calls members to attend weekly meetings
*Treasurer must collect and record attendance and timely payments of members during meeting
FORMATION OF COMMUNITY BANK
The Steering Committee is democratically elected by the group to fufil the duties members and ensure their rights
Rights and Duties of Community Bank
- participate in each of the meetings held (Consolidation, disbursement, payment and savings)
- ask the Board to make the credit application to the institution
- order the appropriate amount of credit for each group
- give reports on payment to members of the Board on the accounts
- make decisions on major issues affecting the maintenance of Rural Community Group
The Committee 5 positions: president, treasurer, vice-treasurer, auditor, and secretary.
The choice of these is held every two cycles. The directors of the community bank can serve for two consecutive terms, after which they are eligible for other charges. Most of the administration, collection and track loans are delegated to the Executive Committee
- President: Dominican citizen who is responsible for taking out loans and dispersing them to other group members. This person is also responsible for any late payments to the bank.
- Secretary: Person who keeps track of all payments from all other members in the book
- Treasurer: Person who collects the money from the rest of the group members and hands it off to the President who then takes the money to the bank
this section is under development
Diagrams and Flows
Under Development - Notional Initial Drafts
This chart shows only 3 of the 6 current groups formed at the border. There is a 7th group being formed.
In this model the President negotiates loans with the Bank and then disburses to Treasurer who then disburse to group members (this current version does not have the accurate arrows depicting the President disbursing to treasurer. Once members can pay back the loan they bring money to the group meeting and secretary records the collection of all money from treasurer using the Border Bank system.
The point of this diagram is to track data points and flow through the system however there are still some aspects that need to be verified .
Functions allocated to the role "President" include:
- Guarentor of the Loans
- Approve Individual Members
Basic Community Bank workflow
ADOPEM bank loans money to the President of each group. The president then uses the group treasurer to disburse sub-loans to the group members. Every 15 days members meet and pay part of their loan back to the treasurer who then takes the money back to the Presidnet who then pays back the loan to the bank.
Conceptual Future State Component and Functional Diagram
This is a very high level and notional view of some key systems that could be part of a more mature and future state architecture.
The functionality is anticipated to include Identity (including the capacity to uniquely identify each accout holder, to authenticate that identity and to manage authorizations granted by that identity).